2016 is an important year. We recently concluded the Olympic games in Brazil, the presidential election is coming up, and the oldest Baby Boomers are turning 70½!
What’s so important about turning 70½? Once you turn 70½, the IRS requires that you take the “required minimum distribution” from your tax-advantaged savings accounts, like your 401(k) and IRA each year. So if you’re turning 70½ and have left your retirement savings accounts untouched to fully maximize compound growth, the time has come to start drawing down those savings.
Why do you have to?
You’ve been putting tax-deferred money away for years now, and according to the IRS, “you cannot keep retirement funds in your account indefinitely.” In other words, you’ve been saving tax-deferred money and watching it grow thanks to the beauty of compound growth. The IRS has been patiently waiting for its share and is ready to tax your distributions.
So how do you know how much you have to take out and from what accounts?
That can get complicated, so give yourself a great 70½ birthday present this year by meeting with a financial advisor to help you start taking out your required minimum distribution.